Unless you belong to the super rich, most of us would
welcome an opportunity to further increase their retirement funds.
The Private Retirement Scheme, for any individual was
recently launched. It is good for individuals who do not have EPF contributions
for their retirement or do not have sufficient funds for their retirement.
The scheme comes under the purview of the Securities
Commission. The Capital Market Services Act 2007 (CMSA), the Capital Market
Services(Private Retirement Scheme Industry) Regulations 2012 and the PRS Guidelines
form the framework governing the PRS Industry in Malaysia.
It is a voluntary investment/savings scheme that would allow
employees and the self-employed to save and
contribute more toward their retirement nest egg. This is supplementary and additional to the
statutory EPF contributions, and will help in enlarging the retirement nest
egg, particularly in view of the longer life expectancy and rising cost of
living.
The PRS will be available to the public by end of the year.(how about Sept/Oct?)
Contributors/Members
It is available for Malaysians and foreigners 18 years and
above.
It is something that employers could use as an incentive to
attract and retain talent. Contributions to the PRS are in addition to EPF
contributions and tax deductions can be above the 19% tax deductible EPF
contributions.
For employees, persuade your kind and understanding bosses
to contribute to the scheme…It would work to their benefit too in the longer
term besides, they can lay claim to being one of the first to offer such
incentives to their employees….
All individuals who invest in a PRS product are entitled to
a tax relief of up to RM3, 000 per year. (this will be for 10 years).
Individuals have the option to contribute any amount
(although providers may specify a minimum amount) and contributions do not have
to be on a fixed basis. No fixed amount, no fixed time interval. However, it is
advisable to follow a Ringgit-cost-averaging to smooth out price fluctuations.
(meaning, best to contribute on a regular basis).
Members will have to open a PRS account. The account could be opened through your PRS Provider
or with PPA. (Private Pension Administrator). You can choose more than one PRS
Provider and contribute to more than one fund. The account structure is split into:
i)
PRS
Account A
with
70% of contributions made and
The amount
accumulated in PRS Account A have to be kept till retirement age or if the
member leaves the country permanently
ii)
PRS
Account B
With 30 % of contributions made.
You can only withdraw once a year
from PRS Account B and your first withdrawal has to be a year from your first
contribution. How much can you withdraw?
Any amount but you will have to pay a penalty tax of 8% on your withdrawals and
a fee of RM25 for each withdrawal.
PRS Providers
PRS Providers (Fund management companies) need to get their
approval from the Securities Commission to launch their schemes.
|
 |
these are the 8 currently
approved PRS Providers
|
As a start, employees or individuals have a choice of
selection of at least 24 conventional/core funds provided by the approved 8 PRS
Providers, (investment fund managers) and these would be available to the
public from September 2012. These fund providers are licensed and approved by
the Securities Commission.
Each PRS provider will provide a range of investment funds
for individuals to choose according to their risk appetite, retirement needs
and time line.
Each PRS provider will have a minimum 3 core funds catering
for growth, moderate and conservative risk profiles.
For feasible reasons and to be pragmatic, PRS providers are
permitted under the Securities Commission guidelines, to channel contributions
to their existing feeder funds (unit trust funds or investment-linked funds) in
the early years. This is during the early stage of development as the fund’s
size will take some time to grow to a size where they are able to invest directly
in the asset classes.
If a person opens and contributes to a PRS account and has
selected his/her PRS provider without indicating his/her investment choice, the
default investment choice will be selected for the individual as indicated below:
Growth Fund
|
Moderate Fund
|
Conservative Fund
|
|
Age Group
|
Below 40 years of age
|
40 – 50 years of age
|
Above 50 years of Age
|
Parameters
|
Maximum 70% Equities
Investment outside Malaysia
is permitted
|
Maximum 60% Equities
Investment outside Malaysia
is permitted
|
80% in debentures/fixed
income instruments of which
20% must be in money market instruments and a maximum of 20% in equity
Investment outside
Malaysia is not permitted
|
Source : Private Pension
Administrator
The returns from contributions made to PRS are not
guaranteed and will depend on the performance of the PRS funds. There are
always risks to investments and returns almost always commensurate with risks.
Investment policies of the funds are guided by the PRS Guidelines consistent with prudent
spread of risks and to develop a retirement fund. PRS funds can invest directly
in real estate, this is unlike unit trusts.
All income received are tax exempted. Switching funds within
a PRS Provider is permitted. Change of PRS Provider is subject to terms imposed
by the Provider, but experts advise to stay with a provider for a minimum of
three years.
The upfront fee for PRS funds is capped at a maximum 3%.
Members’ assets are protected under the controls of an
independent trustee company
PRS distributors require approval of the SC to operate and
will be subject to on-going regulatory requirements and supervision
Private Pension
Administrator (PPA)
The Private Pension Administrator (PPA), regulated by the
Securities Commission will oversee the PRS providers or fund managers. Its
administrative functions would include, taking care of the database,
essentially keeping records of all transactions by contributors. Contributors
can extend their queries to PPA.
Happy Retirement
I am sure the people at large, are appreciative of this
scheme. To ensure the scheme is a success, the interests of members are to be
safeguarded. Regulations, adequate guidelines and supervision would ensure the
goals and objectives of members are realized. More importantly, those charged
with the requisite mandate must always bear in mind the long term objective of
members.
To find out more on Private Retirement Scheme (PRS) kindly click on the following links:
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